Summary of Proposed HHS Notice of Benefit and Payment Parameters for 2026
- Executive Summary
- Standards Related to Reinsurance, Risk Corridors, and Risk Adjustment
- Time Value of Money in HHS-Operated Risk Adjustment Program
- Pre-Exposure Prophylaxis (PrEP) in the HHS Risk Adjustment Adult and Child Models as an Affiliated Cost Factor (ACF)
- Hepatitis C Drugs Adjustment
- Risk Adjustment Data Validation (RADV)
- Other Updates
- Medical Loss Ratio
- Plan Management, Rate Filing and Rate Review Process
- Reduce Solvency Risk
- Silver Loading
- Actuarial Value Calculator
- Standardized Plan Options
- Non-Standardized Plan Option Limits
- Essential Community Provider (ECP) Reviews
- Exchanges
- Exchange User Fees
- Assistance with Financial Assistance Programs
- Enforcement for Misconduct or Noncompliance
- Grace Period Payment Threshold
- Open Enrollment Data
- Quality Improvement Strategy Data
- Other Items
- Basic Health Plan – Premium Adjustment Factor (PAF) Change
Executive Summary
The Health and Human Services (HHS) Notice of Benefit and Payment Parameters (Payment Notice) for 2026 Proposed Rule was recently released[1] accompanied by a summary fact sheet.[2]
Risk Adjustment received interesting proposals for 2026, including a discussion about whether time-value of money should be considered in the program, as well as a proposal to create an “Affiliated Cost Factor” category allowing for the risk adjustment model to consider codes that are not associated with an active diagnosis.
Medical Loss Ratio also received an interesting, proposed formula update for certain issuers who receive significant risk adjustment transfers, where the risk adjustment would be applied to the earned premiums in the denominator, instead of the incurred claims in the numerator.
Plan Management, Rate Filing and Rate Review Process did not receive significant proposed changes for plan year 2026, with HHS instead opting to codify previous guidance for the most part. HHS requested comments regarding review processes that can be implemented to avoid plan solvencies which have caused significant issues in recent years.
Similar to the prior Payment Notice, there were many proposals related to the Exchanges. Specifically, HHS added language regarding identifying and enforcing misconduct or noncompliance by agents, brokers, web-brokers, or even “lead agents.” HHS also announced their intention to improve transparency by releasing additional Open Enrollment information including for State Exchanges, as well as summary Quality Improvement Strategy Data.
Additionally, information was included regarding payments related to the Basic Health Plan which has gathered some at least curiosity among states in recent years.
Standards Related to Reinsurance, Risk Corridors, and Risk Adjustment
The premium stabilization programs (aka the 3 R’s) were established by the ACA, although the reinsurance and risk corridors program are no longer active, while the risk adjustment program is active. HHS noted they did not receive any requests from States to operate risk adjustment for the 2026 benefit year, and HHS will operate risk adjustment in every state and DC.
Interesting proposals for the 2026 benefit year include:
- Considering taking into account the time value of money regarding risk transfers. Are those issuers with higher risk blocks who pay more premiums out as claims losing out on interest that can be earned by lower risk blocks who retain more of their premiums until the risk adjustment transfer payment is made?
- Proposing the risk adjustment model consider “Affiliated Cost Factors,” similar to diagnosis codes but which do not require an active diagnosis into modelling. The first factor would be for PrEP, a drug that can help prevent HIV, but which does not actually indicate whether a patient has HIV.
Risk adjustment is a permanent program, which uses funding from those carriers with lower than average risk to reimburse those carriers with higher than average risk. The calculation is complicated and uses results from the HHS risk adjustment models which project plan liability based on various rate factors such as age, sex, and diagnoses (also referred to as hierarchical condition categories (HCCs)). The benefit and payment parameters often include proposals to refresh the data and to revise elements of the model to improve the effectiveness.
[1] https://www.federalregister.gov/documents/2025/01/15/2025-00640/patient-protection-and-affordable-care-act-hhs-notice-of-benefit-and-payment-parameters-for-2026-and
[2] https://www.cms.gov/newsroom/fact-sheets/hhs-notice-benefit-and-payment-parameters-2026-final-rule